When Insurance Doesn't Cover Property Damage: One Homeowner's Experience
The Shocking Gaps in Coverage: Lessons from a Denied Fire Damage Claim
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A homeowner recently learned the hard way that just because you have insurance doesn't mean you're fully covered when disaster strikes.
In this case, a homeowner's investment property was damaged in a fire - started by the homeowner's son - but the insurance company refused the claim.
The Fire and the Claim
On February 17, 2021, a property owned by a homeowner was set on fire. The homeowner submitted a claim to their insurer, Suncorp. Unfortunately, Suncorp denied the claim, citing a clause in the policy's Product Disclosure Statement (PDS) that specifically excluded coverage for malicious acts and vandalism committed by a resident of the insured address with the policyholder's consent.
In this case, the homeowner's son - who was living in the property at the time - had caused the fire and subsequently pleaded guilty.
The Policy Exclusions
The exclusion the insurer cited is a common one in insurance policies. Policies contain various exclusions that limit coverage, and it's important for policyholders to review these carefully and understand what is and isn't covered.
In this case, the exclusion applied to the son's deliberate act that demonstrated "a reckless disregard for the consequences." The fact that the homeowner didn't consent to the fire was irrelevant because the son was living at the property with the homeowner's consent.
The Insurance Claim Dispute
The homeowner argued that the exclusion shouldn't apply because they didn't consent to their son lighting the fire. However, Australian Financial Complaints Authority (AFCA) disagreed, stating that the exclusion applied to anyone living at the property with the insured's consent. The panel said that it was satisfied that the son had caused the fire and that the exclusion applied.
Notably, while the court refused to record the son's guilty plea due to concerns about his mental health, AFCA said that there was not enough information about his state of mind to overrule the insurer's decision. AFCA added that the complainant could ask Suncorp to reassess its liability once a psychiatric report was provided and the court outcome had been determined.
The Settlement Offer
Following the claim's denial, Suncorp offered the homeowner an ex-gratia payment of $261,318, which the homeowner deemed insufficient for repair costs. The homeowner sought an additional $166,159 or $261,328, based on quotes provided.
However, AFCA noted that Suncorp's offer had been based on an itemised repair quote from an assessment by the insurer's builder, which the panel deemed fair.
Conclusion
Insurance policies can be complex and challenging to navigate, especially when dealing with policy exclusions. In this case, the homeowner's insurance policy didn't cover damages caused by their son, even though the homeowner didn't consent to the fire. Understanding the specifics of your policy - including the exclusions - is critical in knowing precisely what you are and aren't covered for.
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Knowledgebase
Subrogation: An insurance carrier may reserve the "right of subrogation" in the event of a loss. This means that the company may choose to take action to recover the amount of a claim paid to a covered insured if the loss was caused by a third party.
